Qantas deal spells stable revenues

The Indian IT industry's quest for large deals got a big push with TCS and Satyam grabbing a part of Qantas' outsourcing deal. It is the largest deal in the airline space and the biggest so far for Satyam and TCS.

At $90m for TCS and $71m for Satyam spread over seven years, these deals will add significantly to revenues. TCS's travel and hospitality division revenues of $80m last year was from over 40 clients. This deal would add about $12m to that.

The values announced are committed spends and can go up further, if the relationship progresses well. The zeal with which Indian IT companies have been pursuing large deals is bearing fruit. Large deals offer several benefits.

Foremost is a more stable revenue stream that allows IT companies to counter volatility due to smaller contracts. High-profile clients also lead to higher visibility, helping in getting new contracts.

Overheads are spread across a larger base in terms of management and deployment costs. IT companies claim they get higher margins on such contracts, though that is not showing in margins yet. They may show up with a lag though, as contracts take time to ramp up.